To amend the Internal Revenue Code of 1986 to clarify that installment sales treatment shall not fail to apply to property acquired for conservation purposes by a State or local government or certain tax-exempt organizations merely because purchase funds are held in a sinking or similar fund pursuant to State law.

July 23, 2003

Mr. BISHOP of New York (for himself and Mr. HOUGHTON) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to clarify that installment sales treatment shall not fail to apply to property acquired for conservation purposes by a State or local government or certain tax-exempt organizations merely because purchase funds are held in a sinking or similar fund pursuant to State law.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Open Space Preservation Promotion Act of 2003'.

SEC. 2. FINDINGS.

The Congress finds as follows:

(1) Land conservation and farmland preservation is an important national goal that allows farmers to continue to farm on their land, and allows communities to protect invaluable natural resources for future generations.

(2) Farmland in metropolitan and frequently high-cost communities is estimated to account for one-third of all farms, and 18 percent of this nations farmland.

(3) In many urban fringe areas farmland is rapidly disappearing, and the U.S. Department of Agriculture estimates that approximately 95 million acres of farmland will be taken over by sprawl and urban growth in the coming years.

(4) Farmers and landowners generally receive a significantly reduced payment for the sale of development rights and conservation easements than they would receive by selling the land to the private sector for development, yet in many instances these sales are treated the same under the tax code.

(5) In areas where State law requires debt assumed by a municipality to be structured in the form of a sinking fund, farmers and landowners may be discouraged from selling the development rights of their land for conservation purposes. Because sales to State and local governments will be in the form of a sinking fund, a seller may not be able to pay capital gains taxes upfront when the seller will not receive cash payments until a future date.

(6) In urban fringe areas, many communities have made a concerted effort to purchase development rights to land. The land remains private, but the community gains by preserving open spaces and enjoying environmental benefits. Communities will greatly benefit by the federal government taking steps to assist municipalities in the purchase of development rights.

SEC. 3. USE OF SINKING FUND BY STATE OR LOCAL GOVERNMENT NOT TO PREVENT INSTALLMENT SALES TREATMENT.

(a) IN GENERAL- Paragraph (3) of section 453(f) of the Internal Revenue Code of 1986 (relating to payment) is amended to read as follows:

`(3) PAYMENT-

`(A) IN GENERAL- Except as provided in paragraph (4), the term `payment' does not include the receipt of evidences of indebtedness of the person acquiring the property (whether or not payment of such indebtedness is guaranteed by another person).

`(B) TREATMENT OF SINKING AND SIMILAR FUNDS REQUIRED BY STATE LAW- Nothing in this section or the regulations thereunder shall be construed as treating a seller of property to qualified organization (as defined in section 170(h)(3)) as receiving a payment by reason of the fact that some or all of the funds for such purchase are made (as required by State law) to a sinking or similar fund if the property is being acquired by such organization exclusively for conservation purposes (as defined in section 170(h)(4)).'

(b) EFFECTIVE DATE- The amendment made by this section shall take effect on the date of the enactment of this Act.

END